At the results briefing, Sats president and CEO Kerry Mok says the company was not directly affected in the early stages of the Middle East conflict, as it only has a presence in Saudi Arabia and Oman. “Due to the chaos, our Middle East operations were affected as the Gulf airline carriers cancelled their flights, which affected us because we are also their cargo handlers in Europe and the United States as well. Hence, if they are not flying, imports will be reduced, and therefore volumes are affected.”
Despite the flight cancellations, Mok says Sats’s network was able to capture rerouting opportunities, owing to a major investment the company made even as the pandemic’s effects were still being felt. “We are proud to state that the platform we created, which was the combination of Sats and WFS, has proven its resiliency in how we navigate any tensions across the global network. From the Ukraine War to the recent Middle East conflict, we were able to withstand some of these shocks and find new paths to grow and find ways to work with our customers and manage the global supply chain.”
Sats has witnessed growth in cargo volume due to the re-routing. For FY2026, total cargo processed grew 7% y-o-y to 9.65 million tonnes, with the majority of the growth coming from Europe, the Middle East, Africa and Asia (EMEAA), which saw 15.3% y-o-y growth to 4.07 million tonnes.
Mok believes that Sats is in a privileged position where the company is now talking to customers on a global basis and sharing its network, expertise and ways it can work with them to help manage their businesses.
See also: Don’t just look at the debutantes
Even so, as the conflict drags on, rising oil prices have pushed up Sats’s input costs, particularly in utilities and energy. Mok says that food costs remain a significant expense driver, especially for the company’s food solutions business. “Those costs will start to come in as our contracts with our partners are expiring, and once we negotiate the new contracts, you will start to see those costs coming through.”
Sats CFO Timothy Tang adds that Sats will have to manage these rising cost inputs for as long as the Middle East conflict continues. “Longer term, this will normalise, and that is where the growth in our network will offset that cost increase. Right now, we need to ensure that we can manage this shock for the short and medium term and use our internal efficiencies to offset the rising cost.”
Meanwhile, Mok believes that there will be a lagging impact from the higher price resulting from the new negotiated contracts, and the company will have to think about how to pass it on to customers. He adds: “While there is growth in our top line, we cannot allow costs to run ahead too much, and therefore improving productivity and efficiency within our operations will help to offset some of these cost increases.”
Following a results briefing marked by both opportunities and challenges, the key question is whether Sats can sustain its growth trajectory in the coming years amid the ongoing conflict. But for now, Mok is confident that Sats is still on track in achieving its FY2029 targets of more than $8 billion in revenue, 20% or more ebitda margin and above 15% ROE.
